New Economic Realities   //   January 8, 2024

How minimum wage hikes could affect retail workers in 2024

Nearly 10 million workers across the United States are poised to see their paychecks bumped up this year thanks to a slew of minimum wage hikes.

People in parts of California and New York City will see hourly rates as high as $16 an hour, with 22 states and dozens of municipalities putting new laws in effect as of January 1.

But in the world of retail, these laws may not impact many workers — at least, not immediately.

Nationwide, the average retail salesperson wage is about $24 an hour, according to federal data from late 2023. Major retail and e-commerce companies like Amazon, The Home Depot, Target and Lowe’s told Modern Retail they comply with minimum wage requirements — and in some cases, surpass them. Some of that strategy stemmed from pay bumps companies kicked in during the onset of the coronavirus pandemic, beginning a trend of “essential workers” getting paid more to work in public as the virus spread.

But retail businesses could continue to hike wages as they compete for workers in a world of low unemployment and higher starting pay. Amazon, for its part, instituted a starting wage of $20.50 in September, while the Rutter’s convenience store chain in Pennsylvania is paying $18 an hour starting in 2024.

There’s specifically potential for this dynamic in California, where fast food workers will earn a $20 minimum wage starting in April, said Ken Jacobs, co-chair at the UC Berkeley Labor Center. Other pressure could come from a law that boosts pay for health care workers.

“That will put upward pressure on wages in the same labor market that retail stores are competing with,” he said. “We may see retailers raising pay in order to attract workers.”

Rachel Michelin, the head of the California Retailers Association, told Modern Retail that many larger national brands have planned for wage increases. But smaller independent businesses that operate on thinner margins may not have the same ability. That could lead to layoffs, hiring fewer workers, or price increases, she said. In California, two Pizza Hut franchises are laying off hundreds of drivers and getting out of the delivery business ahead of the $20 wage rule.

“At some point, it’s going to be unattainable for these companies, especially our small businesses, to be able to continue to meet these demands, not because they don’t want to pay their employees, but because they just can’t afford to do it and stay in business,” Michelin said.

While individual businesses may feel those effects based on local laws and their operational costs, it’s unclear if there would be a large impact on a national scale. About half of states implemented a minimum wage hike in 2023, and the year ended with unemployment at 3.7%, little change compared to the year prior.

Meanwhile, the Congressional Budget Office, in examining the potential for a $15 federal minimum wage, wrote that it’s uncertain what the effect could be. The federal rate has been $7.25 an hour since 2009.

“Findings in the research literature about how changes in the federal minimum wage affect employment vary widely,” it said. “Many studies have found little or no effect, but many others have found substantial reductions in employment.”

In the near-term, though, the potential for increased pay in the retail sector is an important driver of wage equity, Jacobs said. Women are more likely to work retail, with people of color overrepresented in the workforce, according to U.S. Census findings. Not all of them, either, are earning the median of $24 an hour — in 2018, about 10% of all retail workers lived in poverty.

“Overall, the minimum wage boosts in the state and many cities that are raising it will be ring welcome relief to those retail workers who are earning low wages,” Jacobs said.